Greg Ip Profile picture
Chief economics commentator for The Wall Street Journal. A fox, not a hedgehog. Sign up for our newsletter here:
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8 Apr
1/ A thread. Underlying the differences between neoliberalism and Bidenomics that I wrote about this week… is a different weighting applied to macroeconomic and microeconomic policy...
2/ If you accept the neoliberal default that macro can’t help when all capital and labor are employed, then microeconomic policy must be designed to use those inputs as efficiently as possible. But Bidenomics assumes we're almost always below potential …
and thus it’s okay to pursue microeconomically “inefficient” channels to raise demand (universal transfers, UI bonuses, high minimum wages, etc) because we are still going to end up with higher employment and incomes...
Read 8 tweets
7 Apr
Bidenomics seeks to lower the curtain on neoliberalism. This column explains key differences between the old and new canon. E.g. Old: scarcity dominates, demand > supply. New: slack dominates, supply > demand...…
2. Old: Don't let fiscal policy push unemployment too low, or inflation will rise. New: unemployment has always been too high. Inflation is a remote risk, and less costly than persistent unemployment.
3. Old: Savings are scarce so deficits crowd out private investment. New: Savings are plentiful so deficits aren't harmful. 4. Old: Transfers should be targeted. New: Transfers should be universal. 5. Old: Incentives matter a lot. New: not really...
Read 5 tweets
6 Feb
1/ @AngelUbide @Austan_Goolsbee It's because this is not a standard recession that "stimulus" debate is miscalibrated. The GDP shortfall today is overwhelmingly caused not by lack of demand but supply constraints: people who can't/won't work/consume because of the virus ...
2/ ... so fiscal focus must be first, getting the virus under control, here & abroad. You really can't spend too much there: if we fail at this, GDP never recovers, no matter how many checks we write ....
3/ second, relief for those who have lost income because of virus, both for pure welfare reasons & to sustain demand. Enhanced UI, other targeted relief, does that. With virus suppressed demand recovers endogenously: recall Goldman, Morgan see 7% GDP with just $1T stimulus ...
Read 4 tweets
22 Jan
1/ China beat the U.S. in 2020 because its authoritarian, centralized system better met the challenge of Covid and economic conflict than the U.S.' pluralistic, decentralized system. Will China keep winning? A thread ...…
2/ In 2019 experts ranked U.S. #1 in pandemic preparedness, China #51. Covid outcomes were roughly the exact opposite. China mobilized resources and subordinated individual to collective rights in ways the U.S. could not, or would not ...
3/ On the tech front, official China & private cos redoubled efforts to develop a domestic semiconductor base while in U.S. Cisco rebuffed plea to compete with Huawei & Intel moved to outsource chipmaking ...
Read 7 tweets
20 Jan
1/ The S&P rose 14% between election day and inauguration, the strongest transition rally on record (H/T @WSJ market data group). It rose 6% during Trump's transition, which leads me to reconsider ...
2/ .. importance of taxes (& regulation) in market returns. A lot of Trump rally, I thought, was due to lower expected corporate rate. Now, corporate rate is expected to be flat to higher (since D's won the GA senate) but market up even more ... so this is risk-on and ...
3/ shows that macro outlook (rates + fiscal + growth & of course, vaccines) is way more important than micro outlook for rates, regulation. (S&P transition return below)
Read 5 tweets
20 Dec 20
1/ Sen. @SenToomey's office wanted to curb Fed emergency lending to “preserve Fed independence and prevent Democrats from hijacking these programs for political and social policy purposes.” Yet Toomey also voted to confirm Judy Shelton to the Fed ...…
2/ ... who called for Fed monetary policy to support Trump's tax, trade and regulatory agenda, & has down played Fed's independence, saying Fed should "pursue a more coordinated relationship with both Congress and the president."… ...
3/ Toomey has been consistent on some issues e.g. opposing Trump on trade, but on Fed, he seems much less worried about central bank independence under a Republican than a Democratic president.
Read 4 tweets
24 Aug 20
1/ Lockdowns were a blunt & indiscriminate tool that slowed infections, but with no clear strategy for what came afterwards. We know enough now about how to bring down infections at a much lower cost to the economy. My latest.
2/ We had never used lockdowns before, not even during the 1918 flu. Pre-Covid, they were seen as too draconian and difficult to enforce and thus weren't part of the epidemiological toolkit.
3/ The U.S. missed its chance to emulate HK, Taiwan & SK using testing, tracing & quarantine to stop the pandemic without Covid. But nor did it make a clear choice between simply flattening the curve and allowing infections to continue, as Sweden did ....
Read 9 tweets
23 Apr 20
1/5: Should we worry about the debt? With $484B more stimulus, deficit will hit a post-war high & debt by 2022 will match post-war record. McConnell frets. Should he? My column answers:… Thanks to @budgethawks for figures and @asincopado for charts.
2/5: Long-and short-term interest rates have plunged to between 0% and 1% since pandemic began, and will likely stay low for years more. (Thanks to @csm_research for rate forecast). That completely offsets effect of higher debt on debt service. Ergo, sustainability unaffected.
3/5: I’m not saying this much debt is necessary or being used optimally; that's a topic for a different column. But debt does harm by crowding out private investment and that hasn’t been happening for years, and looks unlikely for years more.
Read 5 tweets
3 Mar 20
1/ One of the consequences of a president who judges all policy actions by the stock market is a tendency of everyone to judge the efficacy of policies by whether they help the market. This is a "looking in the mirror" problem.
2/ The market, like the public, is looking to policy makers to, first, deal rationally and effectively with the virus. That means listening to the scientists, doctors and epidemiologists. Second, the market and the public expect policy makers to mitigate the economic spillovers..
3/ ... as best they can with the tools they have. What should policy makers' response to the market be? Something like: once we have done our job of protecting Americans' physical and economic safety and security, the market will take care of itself.
Read 5 tweets
26 Feb 20
1/x Could coronavirus cause a recession? At some level I feel it's the wrong question. I think of a recessions as more than just a decline in output over x months; it's an endogenous process of declining profits, employment, demand, feeding on itself.
2/ an epidemic like a natural disaster is an exogenous event that acts on supply first and then demand, and while severity and duration vary, it is not a self-sustaining economic process. Once over, both supply and demand recover ...
3/ to pre-event levels. Think of a snowstorm that closes the schools, offices & stores for a day. The GDP drop from the previous day is horrendous. But this does not mean pre-snowstorm GDP was unsustainable or unbalanced and tells us nothing about the future path of GDP...
Read 6 tweets
14 Feb 20
1/x Quick thread on this. Article 1 Section 9 of the constitution says: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by law." ...
2/x In 2014, the GOP-controlled House sued the Obama administration for funding cost-sharing payments for Obamacare without an appropriation that it said violated the constitution.
3/x The House's lead counsel was @JonathanTurley who said, in seeking standing for the House, Obama's constitutional "violations run to the very foundation of the separation of powers doctrine".…
Read 8 tweets
11 Sep 19
1/9 Today's column reports on a private market to pay farmers to sequester carbon in their soil. It's one of the most promising climate policies I’ve seen because it avoids many of the pitfalls of others, as this thread describes.…
2/9 Sequestration can offset fossil fuel emissions which are economically impossible to eliminate (e.g. aviation). It thus makes net-zero emissions (or net-zero increase in emissions) more achievable and less costly.
3/9 The potential considerably exceeds other sequestration schemes: soil could absorb one sixth of global emissions. As usual, barriers are cost & scalability, e.g. introducing regenerative growing where soil is most depleted like Africa. But those barriers are surmountable.
Read 9 tweets
27 Mar 19
The only thing worse than the gold standard is acting like you're on the gold standard when you're not. /1
Under the classical gold standard countries maintained gold reserves to back their currencies and manage international and internal gold flows. This meant interest rates could sometimes adjust to domestic conditions without threatening convertibility. /2
If you are in a fiat, floating currency regime and start targeting gold or a commodity basket, you don't have reserves of gold or commodities to manage the peg and as a result, interest rates must do all the work. /3
Read 5 tweets
27 Apr 18
1/9 A tweetstorm on reading q1 growth slowdown & whether tax cut is working. Deceleration from q4 (2.9% saar) to q1 (2.3%) distorted by hurricane-driven q4 spike in car sales & home repairs. Excluding motor vehicles and residential investment, growth went from 2% to 2.7%.
2/9 Year/year growth, which eliminates seasonality problems, rose to 2.9% - best since mid-2015. Excluding volatile net exports, inventories, and government, final sales to private domestic purchasers grew 3% y/y, still decent.
3/9 Does Trump get credit for getting close to 3% target? Complicated question, but probably not yet. We know a lot of slowdown in 2016 and pickup in 2017 was due to collapse and rebound in oil prices & drilling. Expect some tapering in coming year.
Read 9 tweets
4 Apr 18
My quickie tweetstorm analysis of the U.S./China trade conflict. 1/7: Both U.S. and China have mobilized but trade war has not begun. Both have left time to negotiate before implementing tariffs.
2/7 Whereas Trump jumped the gun on Sec. 232, announcing across the board steel & aluminum tariffs form which he eventually had to climb down, the 301 on China has so far been a graduated program leaving room to escalate/de-escalate.
3/7 Congressional Rs, allies and business saw 232 tariffs, Nafta & KORUS threats as needless attacks on allies. By contrast they agree China is a bad actor & action is warranted, though not necessarily this specific action. Gives Trump useful cover, staying power.
Read 7 tweets